RBI Amends Guidelines on Financial Services Provided by Banks
RBI has amended its Master Direction (or guidelines) on financial services provided by banks, which it originally issued in May 2016. The provisions of these Directions shall apply to every Scheduled Commercial Bank (excluding a Regional Rural Bank or RRB), licensed to operate in India by RBI. Unless otherwise specified, these directions shall not be applicable to overseas branches and subsidiaries of these banks.
RBI decided to make certain amendments after considering the suggestions and queries received from SEBI, banks, and other stakeholders. The amendment states, among others, that no bank shall:
- Hold more than 10% in the equity of a deposit-taking non-banking finance company or NBFC, provided that this does not apply to a housing finance company
- Make an investment of more than 10% of the unit capital of a Real Estate Investment Trust/Infrastructure Investment Trust subject to overall ceiling of 20% of its net worth permitted for direct investments in shares, convertible bonds/debentures, units of equity-oriented mutual funds and exposures to Alternative Investment Funds (AIFs)
- Hold along with its subsidiaries, associates or joint ventures or entities directly or indirectly controlled by the bank; and mutual funds managed by Asset Management Companies controlled by the bank, more than 20% of the investee company’s paid up share capital engaged in non-financial services
- Make any investment in a Category III AIF. Investment by a bank’s subsidiary in a Category III AIF shall be restricted to the regulatory minima prescribed by SEBI
Furthermore, the amendment states that banks shall ascertain the risks arising on account of equity investments in Alternative Investment Funds done directly or through their subsidiaries, within the Internal Capital Adequacy Assessment Process (ICAAP) framework and determine the additional capital required, which will be subject to supervisory examination as part of Supervisory Review and Evaluation Process. This shall also be applicable to sponsoring of Infrastructure Debt Funds by banks. Additionally, Section 14(a)(ii) is being amended to read as under: “It [bank] has the minimum prescribed capital (including Capital Conservation Buffer) after investment.”
Keywords: Asia Pacific, India, Banking, NBFC, AIF, ICAAP, RBI
Previous Article
RBI Accredits Another Credit Rating Agency INFOMERICSRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.